Tuesday, 25 August 2009

New ideas, not just new faces

John Mangun
Outside the Box
Business Mirror
http://www.businessmirror.com.ph/home/opinion/15059-new-ideas-not-just-new-faces.html

It would appear that the 2010 election season is in full swing. Potential candidates are either testing the waters or full out focusing their sights on the next step up in their careers. The problem is that the faces change but the song always remains the same. Maybe that is one reason the Philippines never seems to reach its potential and move forward with any sustained vigor.

Being President of the Philippines could be the best political office on the planet. For the most part, the legislature, and to a lesser extent the judicial branch, follows the lead of whoever sits in Malacañang. It is almost like having all the influence and force of a one-man-rule system without needing to watch your back for someone to put a knife in it. Unfortunately, all that official power is rarely, if ever, combined with any creativity or imagination.

In an elementary-school class, the teacher might ask the little ones to write one or two things they might do if they were the President. One might answer that free ice cream would be his first official act. That might seem impractical and not feasible, but then again it is not any sillier than some of the suggestions that come from some of the people who want you to make them President for real.

Another child might suggest that math classes be made easier or even abolished. Foolish? I am not sure that is any more foolish than some of the regulations that business people must face and hurdle when they try to set up or expand their commercial enterprises.

It would be refreshing to hear a single candidate for the presidency say something different from what has been said a million times before. It is always, always the same ideas but with the conviction that if this person or that person tried those ideas, it would be successful this time.

Albert Einstein said, “Insanity is doing the same thing over and over again and expecting different results.” Does that sound like the pattern of the Philippine government?

On the rare occasions that something new is attempted, it is met with fierce opposition. The value-added tax (VAT) is a good example of that last point.

Perhaps the insanity of Albert Einstein can be found in the call for a return to oil deregulation. Now I am not saying that this is a good or bad idea. But I do remember this. There were repeated calls for de-regulation 20 years ago because the government, who then completely owned Petron, was supposedly keeping prices artificially high for their own gains.

I for one would like to see a single presidential candidate offer a new solution to the corruption issue, for example.

Traditionally, all candidates have called for stronger enforcement and harsher penalties for corruption. Perhaps then, the ultimate solution is to torture and then burn at the stake anyone involved with income-tax fraud, both in the private sector and with the Bureau of Internal Revenue (BIR). That might get people to respect the rules. Or maybe people are never going to fully obey income-tax rules and maybe there will always be corrupt government tax officials.

Perhaps a more creative and effective solution would be to abolish income taxes completely.

Income taxes are not pro-poor, anti-rich or any of that nonsense. Income taxes are anti-hard working people of all income brackets. The company president and the company messenger both pay income taxes. The drug dealer does not. The working person is penalized for following the rules. The drug dealer is not. Some 2,500 years ago Plato said, “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”

The same applies to corporations and corporate taxes. If your company employs 100 people and you make a profit, your tax rate is 30 percent or more. But if you run a nice and tidy gambling operation with a 100 people employed, your profit is taxed at zero percent. Now tell me the progressive income tax is fair. To whom?

The creative approach would be to abolish all income taxes. No more tax cheats that do not follow the rules. No more government corruption at the BIR. Everyone, rich and poor, are then treated equally.

The government can easily make up the revenue shortfall with an increase in the sales or VAT tax. Sales tax is the fairest of all taxes. As long as food, medicine, clothing and other essentials are exempted, there is no penalty on the lower-income earners and lower economic groups. The “rich” man and the “poor” man both pay the same amount of tax on their newly purchased washing machine.

Do not say that an increase in the VAT will reduce consumer spending. With the abolition of income taxes, the consumer will have more money to spend. The difference is that the consumer will choose how to spend the money, not the government.

The point of my rant is simply that we need creative solutions to the problems and it does not seem that the politicians have the boldness, the courage to propose something out of the ordinary.

When will come a candidate who offers new ideas and not just the offer of a new face to battle the economic and social problems of the Philippines?



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